Minnesota Solar Incentives: Tax Credits & Rebates Guide (2022)

By Jon Jachura

As the push to switch to renewable energy grows, thousands of homeowners are switching to solar power. Some states are more solar-friendly than others, as some offer excellent rebates, incentives, and credits. This guide covers specific solar incentives available to Minnesota homeowners and businesses, including:

  • Why a solar energy system makes sense
  • Rebates that will help lower the cost of a solar energy system
  • Various tax incentives to make your solar system even more affordable.

As a whole, Minnesota is quite solar-friendly, as there are multiple state-level incentives available. When paired with federal incentives, the cost of a new solar energy system drops considerably.

Why Go Solar in Minnesota?

Solar is becoming an increasingly popular addition to Minnesota homes. Although Minnesota receives fewer sunny days than the United States average, the price per watt is lower than average. The total cost is generally higher, however, since many homeowners need more panels to produce similar amounts of energy as states with abundant sunshine.

With this in mind, switching to solar in Minnesota is doable for many homeowners, as numerous rebates, incentive programs, and tax exemptions lower the steep upfront price of a solar energy system. On top of local incentives and rebates, homeowners can take advantage of the Federal Solar Tax Credit, which slices the final cost substantially.

Solar energy systems make it possible for Minnesota homeowners to save on electric bills and earn credits to use toward future utility bills due to the state’s exceptional net metering program.

Minnesota Solar Cost

Homeowners throughout the North Star State can expect to pay about $22,720 for a solar energy system before utilizing any incentives or rebates. Given that Minnesota only receives around 195 days of sunshine annually, homeowners need to install additional panels to harness enough energy for their homes.

Due to this, costs for a solar energy system can be slightly higher than systems in sunny states, where fewer panels may be necessary to gather energy. Of course, pricing ranges based on numerous factors, including the size of your home, your home’s energy consumption, the solar company you choose to go through, the solar panel brand, and your energy efficiency, among other factors.

However, Minnesota is a solar-friendly state, so homeowners have multiple rebates and incentives available to offset the overall cost of the system. Aside from local solar incentives, homeowners can also tack on the Federal Solar Tax Credit for additional savings after filing taxes.

Solar system on house rooftop

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How Much Can You Save on Solar in Minnesota?

Minnesota residents can save thousands to tens of thousands on new solar energy system installations. The savings come from utilizing the pool of rebates and incentives available to Minnesota homeowners, such as the state’s sales and property tax exemptions or the rebates offered through local power and utility companies.

Combined with the Federal Solar Tax Credit, homeowners in the North Star State could save themselves thousands of dollars.

The Best Solar Incentives, Tax Credits, & Rebates in Minnesota

Incentive Summary End Date
Federal Solar Tax Credit The ITC credit can return up to 26% of the total system cost to Minnesota homeowners in their tax returns. December 31st, 2023 (reduces to 22% before expiring in 2024)
Minnesota Sales Tax Exemption Minnesota homeowners are exempt from paying sales tax on solar equipment, which can save about $1,500. None
Minnesota Property Tax Exemption Although solar energy systems increase the value of your home, Minnesota homeowners don’t face elevated property taxes due to installing a solar energy system. None
St. Louis Park Solar Sundown Program This program targets low-income homeowners and can save up to 6% on the total cost of a solar energy system. None
XCEL Energy Solar Rewards Program Minnesota homeowners can receive payments from XCEL Energy at a rate of $0.07 per kilowatt-hour for their solar energy system’s overproduced energy for ten years. None

Before investing in a solar energy system, consider the available incentives and rebates. Some of these programs require minor but critical steps to ensure you can take full advantage of the price cut and savings. Remember to follow the requirements exactly as instructed to reap the benefits.

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax Credit, also known as the ITC, is available to homeowners in all 50 states, including Minnesota residents. The ITC offers a discount on your new solar energy system purchase via your next federal tax return.

There are specific stipulations of the federal tax credit (PPAs and solar leases don’t qualify), but eligible homeowners can receive up to 26% of the original system back. The way this works can be confusing, as some homeowners think the 26% is taken off the purchase price.

However, this isn’t the case. Homeowners are required to pay the upfront cost of their solar energy system, but when they file taxes, the 26% comes back to them as part of their tax return. While the initial cost can be steep, a portion of this will come back to the homeowner in their tax return.

Minnesotans contemplating a solar power system for their residential property should note that the Federal Solar Tax credit is dropping from 26% to 22% in 2023. After 2023 concludes, the credit will completely dissolve for residential installations unless the federal government decides to keep it in play.

The reduction is imminent, and the potential disappearance of the bill looms on the horizon, so homeowners debating solar energy may want to install solar sooner rather than later. Remember that you can always use the ITC in tandem with other incentives and rebates to keep the overall cost as low as possible.

Minnesota Solar Sales Tax Exemption

Sales tax can contribute a sizeable chunk to the overall cost of a solar energy system. Residents in the state of Minnesota don’t have to worry about allocating extra funds for sales tax, as solar energy systems are exempt.

Considering the average cost of solar energy systems in Minnesota ($22,720) and the average sales tax rate (6.875%), many homeowners would have to pay about $1,562 extra in sales tax.

Minnesota Solar Property Tax Exemption

For the most part, improving an aspect of your home drives your property value, increasing property taxes. This can be a concern for homeowners considering solar, as it’s an extra expense to worry about.

However, Minnesota solar energy systems are exempt from property taxes. This means your new solar energy system will not increase your property taxes despite increasing your home’s value. Over the system’s lifespan, the lack of additional property tax can amount to thousands to tens of thousands of dollars in savings.

Minnesota Net Metering

Many states offer net metering programs, some better than others. Net metering is a policy that allows homeowners to collect energy from the grid but use their excess energy production from their solar array to offset and reduce these costs.

In other words, if your solar system overproduces and you don’t need all of the energy it’s harnessing, you can send it to the grid. This energy is credited toward your energy bill based on the amount you send.

When your system underproduces, the grid accounts for the difference. If you have credits with the utility, they will offset your bill based on those credits. In some scenarios, your electric bill might be reduced to almost nothing, even though your system isn’t producing enough for your home.

Each utility company has slightly different terms for its net metering policy, which may vary from one to the next. For example, one provider might set the rate at how they buy back excess energy and how frequently you’re credited monthly, while another puts it on an annual basis.

In Minnesota, XCEL Energy offers one of the best net metering policies. The electric company rolls over “credits” for overproduced energy sent to the grid every month. If your system overproduces enough to drive the total to $25 or more, the company sends Minnesota property owners a check for the overproduction since the last payout.

Rebates And Incentives By Location

Several programs are available to residents in specific cities throughout the state. For example, the Minneapolis Green Cost Share program offers incentives for each kilowatt-hour produced at a minimum of $0.20/kWh, providing you qualify.

Residents of St. Louis Park can take advantage of the Solar Sundown program, which can reduce overall installation costs by up to 6%. This program specifically targets low-income homeowners and can save up to $1,363 (based on the average system cost).

Chaska residents can utilize the Chaska Solar Rebate program, which can slice up to $2,500 off the overall installation cost for qualified customers.

Power Company Rebates And Incentives

Aside from local rebates and incentives, certain power companies throughout the state offer incentives to switch to solar.

XCEL Energy offers an exceptional opportunity to reduce the long-term installation costs of solar energy systems. The Solar Rewards Program provides an annual cash incentive of $0.07 per kWh that your system overproduces. The program is available for a whopping ten years, so homeowners could potentially eliminate their electric bills and get paid by the provider (instead of the other way around).

Minnesota Power’s SolarSense program offers rebates for solar installation based on systems size, total cost, and the number of residents applying for the program. In 2022, the maximum allocation of funds is over $175,000.

Customers of Dakota Electric Association can take advantage of a $500 solar commissioning rebate, available to all customers who install new solar equipment and put it into commission.

Owatonna Public Utilities offers a similar program (Conserve and Save) where customers can receive a $500 rebate. The program is first-come, first-serve, so rebates aren’t guaranteed.

Rochester Public Utilities offers solar electric rebates for new solar panel systems at least 2kW in size. The rebate is worth $500, and most customers qualify since most systems are about 8kW.

Commercial Minnesota Solar Incentives

Minnesota residents have access to numerous rebates and incentives, but so do businesses. In many scenarios, businesses can save thousands of dollars using available incentives, especially due to the demand for larger systems.

Solar Incentives for Nonprofits and Businesses in Minnesota

The Property Assessed Clean Energy (PACE) program is available to numerous entities in Minnesota, including commercial buildings, farms, nonprofit organizations, and investor-owned multi-family properties. The PACE program helps make solar loans more available and affordable, which helps drive the rate of solar conversions across the state. The program assists with acquiring solar energy systems, various HVAC systems, energy-efficient equipment, and much more.

The program is available through MinnPACE, and as of now, the state allows PACE loans for commercial and nonprofit customers. However, the residential side of things is still in progress, so many residents are ineligible for this program.

USDA REAP Grant

Agricultural producers throughout the U.S. can take advantage of the Department of Agriculture’s Rural Energy for America Program (REAP). This program offers assistance during the switch to renewable energy, helping with loans for clean energy systems, including solar.

REAP resources aren’t limited to agricultural producers – many small businesses in rural areas can utilize this grant to install or upgrade renewable energy sources. The small businesses and farmers can continue focusing on their work after submitting their solar project plans, as the USDA handles applications on their behalf for available grants.

To start, Minnesota businesses must provide their contact information to the USDA.

Federal Solar Tax Credit for Businesses in Minnesota

Minnesota homeowners aren’t the only ones who can benefit from the Federal Solar Tax Credit. Minnesota businesses can claim up to 30% of the cost of their solar energy systems in their taxes, which can amount to thousands of dollars in savings, as many businesses need larger systems.

While this credit is currently available at a whopping 30%, it will drop to 10% in 2023, and in 2024, the credit will expire completely. So, like Minnesota residents, the time for Minnesota businesses to switch to solar is now.

Key Takeaways: The Best Minnesota Solar Incentives

Solar energy systems no longer feature a massive financial hurdle that bars residents from pursuing renewable energy. Minnesota residents have access to multiple state-level rebates and incentives to slash the cost of their new solar energy system. Combined with the ITC, solar is becoming more financially viable for homeowners throughout the state.

As the years pass, solar may become more affordable. However, in the next few years, the ITC will drop before eventually expiring, so now is the time to take advantage of the lower costs and invest in a renewable energy system.

Minnesota Solar FAQ

Is solar worth it in Minnesota?

Yes, solar is worth it in Minnesota. Given the extensive list of rebates and incentives available through numerous power companies, Minnesota homeowners can drastically reduce the cost of their systems. On top of that, homeowners can take advantage of the Federal Solar Tax Credit, which accounts for 26% of the total expenditure on their next tax return.

Additionally, Minnesota solar energy systems are exempt from property and sales tax, so homeowners don’t need to worry about paying extra in these areas. Aside from this, a solar energy system increases the value of your home. So, considering the extensive benefits and the potential to wipe out your electric bill, solar is worth it in Minnesota.

How much will my electricity bill go down with solar in Minnesota?

Implementing solar panels can make a substantial difference in energy costs for your Minnesota home. The total amount you’ll save on your electric bill depends on how much you currently spend on electricity, the size of your system, and how much you can offset with solar.

Some homeowners can knock their electric bill down to nothing, and some even get paid for the extra energy their systems produce, as Minnesota has an excellent net metering process.

How much does it cost for solar panels in Minnesota?

In Minnesota, the average cost of going solar is $22,720, or $2.84 per watt. Using the average system size required in Minnesota, which is 8 kilowatts, we can determine the average cost of solar energy systems.

These costs are before applying any available rebates and incentives, such as the Federal Solar Tax Credit, which can take a whopping $5,907 off the total cost.

Can you get solar panels for free in Minnesota?

companies make it seem that the panels are free, you’re essentially signing up for a solar lease or power purchase agreement (PPA), in which you’ll pay for the panels.

However, Minnesota offers many rebates and incentives, so the system’s total cost may be much lower than in other states.

What solar rebates are available in Minnesota?

Minnesota homeowners have numerous solar rebates and incentives at their disposal. For example, XCEL Energy offers a Solar Rewards Program with an annual cash incentive of $0.07 per kilowatt-hour that the system overproduces for ten years. The incentive is higher for low-income homeowners.

Minnesota Power offers its SolarSense program to all its customers, offering rebates for solar installations based on sizing, cost, and the number of residents applying for the program. As of 2022, the maximum allocation of funds is over $175,00, so the potential to save with this rebate is solid.

The Minneapolis Green Cost Share program is available to Minneapolis residents and offers an incentive minimum of $0.20 per kilowatt-hour produced, providing you qualify.

St. Louis Park Solar Sundown offers a rebate of up to 6% of the total system cost for low-income homeowners. The Chaska Solar Rebate Program provides rebates up to $2,500 for qualified customers.

The Dakota Electric Association offers its customers $500 solar commissioning rebates. Rochester Public Utilities offer solar electric rebates of $500 to customers who newly installed solar energy systems at least 2 kW or larger.

Owatonna Public Utilities offers its customers a $500 rebate via its Conserve and Save program, although this rebate is first come, first serve.

Last but not least, Minnesota homeowners can take advantage of the Federal Solar Tax Credit, which offers up to 26% of the system’s purchase price when the homeowner files their taxes.

How many homes in Minnesota have solar panels?

Thousands of Minnesota homeowners have switched to solar panels, but the number continues to climb. There are enough solar panels throughout the state to power 222,578 homes, accounting for about 3.52% of the state’s electricity.

Do solar panels increase property taxes in Minnesota?

No, solar panels don’t increase property taxes on a Minnesota home. Solar energy systems in Minnesota fall under a property tax exemption, meaning a homeowner’s property taxes will not rise after installing a photovoltaic system.

How much can you write off for solar panels on taxes in Minnesota?

In the state of Minnesota, homeowners who invest in solar energy systems can claim the 26% percent credit on their federal taxes. On top of that, Minnesota solar energy systems are exempt from sales tax, meaning they don’t have to pay sales tax on the system.

House Method’s Solar Companies Rating Methodology

At House Method, transparency and trust are our most important values for the reader. That’s why we took the time to create an objective rating system and score each solar energy company/service according to our methodology.

Our research team dug deep into the fine print of contracts, combed through more than one hundred customer reviews, and thoroughly investigated all of each solar energy company’s services, costs, and products. We’ve done the homework for you by researching nearly all of the solar energy companies on the market so you can have the information you need to make the best choice for your home.

We developed a formula to objectively determine the best solar energy companies and give each a score out of 100 based on the following criteria:

  • Plan Options (30): Do they provide a variety of plan options? We looked at the number of plans each solar energy company offered and the flexibility of adjusting the plan.
  • Services offered (20): How many services are offered in each plan? We looked at whether the company manufactures its own solar panels, whether it contracts out installation, and what additional products each company offers.
  • Trust (10): What do customers say after their solar panels are installed? Does this company offer a guarantee? We considered how satisfied customers are post-service if the company does what it says it will, BBB accreditation, and service guarantees.
  • Prices (10): How reasonable are the costs of the plan or service in comparison to the industry average? We compared the costs of each company to competitors that offer the same solar energy services.
  • Unique perks (10): Does the company offer discounts or special services such as financial incentives, rebates, or a useful mobile app? We looked for extras each company offers that set them apart from the competition.
  • Customer Service (10): How is the customer experience when contacting the company? We considered the speed of response, weekend/holiday availability, and ease of communication through phone calls, email, and online chat functions.
  • Nationwide availability (10): How many states does the company offer its services? Companies that operate nationally and in all zip codes are favored over those with limited availability.

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